Introducing our guest writer
Polly Benton is a consultant who helps creative businesses with their strategy, finances and operations. She has also worked in television, film, theatre and literary rights management. So as well as being a whizz with systems, Polly really gets the creative mindset.
I asked her to write this guest post because getting to know your numbers can be the difference between surviving and thriving, as a creative. And you deserve a business that supports you!
It’s all about knowing your numbers
You probably don’t think of yourself as a ‘numbers person’. Most of the creatives I work with aren’t. They started their business to pursue their creative passion and to work doing something they love.
Of course they need to make a living and want to know the bottom line. But understandably, they’d rather be spending their time on creative work than fiddling with spreadsheets or talking to their accountant.
Yet engaging with the numbers can be a game-changer for creative businesses. The numbers tell us what’s really happening in our business; what’s working and what isn’t, as well as helping us to see what’s possible. Used effectively, numbers can be the key to unlocking the growth you’re looking for.
Here are four mistakes I see creative businesses commonly make when it comes to their finances:
Mistake 1: Not focusing on cashflow
Whether you’re a team of 20 or a sole trader, for a small business cashflow really is king. Cashflow issues are the number one reason that businesses fail; profit is wonderful, but no use to you if you run out of money trying to get there.
Even if you work on your own, visibility on your cashflow is crucial and enables you to think and operate like a business. It doesn’t need to be complicated; all you need is a simple tracker of how much money is in the business, and when you expect money to be coming in and going out over the next 12 months.
Keeping this regularly updated will help you foresee any tight spots on the horizon – hiring a new team member, buying new kit, or moving into a new workspace – and enable you to plan accordingly. Being on top of your cashflow can alleviate enormous amounts of stress.
If spreadsheets really aren’t your thing, find someone who can set it up a for you. Perhaps they can even work with you to update and review it on a monthly basis. You’ll be amazed what a difference the visibility makes for your business. And your stress levels!
Mistake 2: Not making a plan
Most of the creative businesses I work with don’t feel they are big enough to justify financial planning. Most small businesses are learning and evolving as they go so the idea of putting numbers down to reflect where they might be in one, three or five years seems like a waste of time – it will all just be made up, anyway.
But this misses the point. Financial planning is less about getting the numbers ‘right’ and more about being intentional about where you want your business to be going.
- Are there things you’d like to be doing more of?
- What would that mean for your income?
- What additional support or infrastructure will you need to make that happen, and what will that cost?
Financial planning allows us to play out different gameplays, to ask if we did X or Y, what impact could that have on the bottom line?
Not everything you put into a financial plan will happen.
In fact lots of it won’t. But you are significantly more likely to achieve growth in your business when you’ve stopped to think about where that growth might come from and what you need to achieve it.
Revisiting a plan on a quarterly or six-monthly basis also enables you to track progress and re-evaluate your assumptions.
- What’s changed?
- Where have we over or underperformed expectations?
- Does this plan still make sense?
A financial plan is more than just a guessing game. It’s a strategy to keep you focused and present in how you run and grow your business.
Mistake 3: Avoiding your accountant
For so many businesses, the annual accounts involve dread. What nasty surprises are they going to find? How much tax will we have to hand over?
The accounts can feel like the end-of-year exam, with our accountant holding the red marker pen. So creatives often avoid their accountant – meeting as rarely as possible, and sharing only what’s requested.
If this is how you feel, it’s time to make your accountant your friend. Yup, it’s possible! Good communication with your accountant can help you avoid nasty surprises and maximise your profits.
A great accountant will meet with you regularly to understand what’s happening with your business. (And your financial plans will be invaluable here). This will prevent any surprises when it comes to preparing your accounts, particularly with taxes.
Sharing strategic plans can also be helpful. If you’re thinking about borrowing or raising money, for instance, or you’re considering selling the business in the future, your accountant can advise you on the most efficient way to structure things to achieve the desired outcome.
Mistake 4: Not putting systems in place
For most creatives, spreadsheets and software are just not their bag. The brain that thrives on the free flow of creativity is rarely one that also loves to create process and order. So most of the creatives I work with lack systems within their businesses that could make running it much easier.
Which systems do you need? That will vary hugely from business to business. It might be a system for managing customers or contracts, invoicing software, a tools for estimating fees, a project management system that feeds into your cashflow, or a database of all of your artwork.
Think about the boring tasks you end up doing over and over again. There is almost certainly a system that could make that easier!
There are two parts to putting a good system in place to help you run your business.
Working out what you need, and setting it up
Identify the areas of your business that are repetitive, painful or laborious. See if there’s software to solve your problem, or if a spreadsheet or checklist would suffice.
Then set up the system to do what you need, in a way that’s easy to use and maintain. This is my favourite part, but it’s the part most people hate.
If the thinking about systems fills you with dread, get help from find someone who loves them!
Using and maintaining the system
How many times have we all started to use a new system – a to-do list or a budgeting spreadsheet for example – then quickly abandoned or forgotten about it?
You will only benefit from a good system if you incorporate it into your routine, whether that’s daily, weekly or monthly. Scheduling time to update and review information can make a huge difference. Even better, create accountability by reviewing it regularly with someone else.
The goal here is to make your life easier.
You’re adding some bits of short-term admin to remove far more burdensome admin over the long term.
Overall, the main mistake creative businesses are making when it comes to their finances is just not engaging with them enough. If you’ve been avoiding the numbers, it’s time to start getting familiar with them.
Putting systems in place to give you greater visibility on your finances will give you the clarity you need to take the business in the direction you want to. If you don’t have someone on the team to help you do this, work with a consultant or advisor who can help you get things set up and/or meet with you regularly to review them.
It will make a huge difference, and ultimately free you up to do more of the creative work you want to do. Without that nagging feeling of dread in the background!
You can find Polly at pollybenton.com. If you’re still feeling fear around engaging with your numbers, it might be time to dig deep into your beliefs around money, and change your money story. This free workbook will help.
What do you think?